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Rising food costs may not hit consumers
From meat to produce and cocoa, food prices have climbed significantly lately-but food and grocery companies might not pass that cost on to the consumer, executives told CNBC.
Appearing on " Squawk on the Street ," Nestle (Swiss Exchange: NESN-CH) USA CEO Paul Grimwood said Tuesday the world's largest consumer goods firm has experienced "a little bit of inflation in the marketplace." But the food and beverage giant, with products ranging from Gerber baby food and Nescafe coffee to Kit Kat chocolate and Maggi soups, has so far offset costs thanks to improved efficiency at its factories, he said.
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"It's important we do whatever we can to improve our efficiencies and to improve the value that many of our brands deliver, and at the end of the day, you know, only in the final set of circumstances do we put price increases through to consumers," Grimwood said. "We would rather do what we can to cover commodity increases with efficiencies, but obviously, that's not always possible."
At Kroger (KR), the U.S.'s largest grocery store chain, inflation "kinda picked up" in the company's latest quarter, an executive told CNBC.
"The core grocery category was not that bad during the quarter, but did go up a little bit each one of our four periods during the quarter, so we think it will be a little higher than we originally thought this year," Michael Schlotman, chief financial officer at Kroger, said on "Squawk on the Street."
Though food prices across the board have been on the rise, produce has particularly spiked due to the prolonged drought in California, Schlotman said. However, other growing fields may soon come to market, thereby increasing supply and alleviating rising produce prices.
"So you can't really raise prices. You actually hurt a little bit in the period of high inflation of produce because it's difficult to raise prices that fast in a commodity where the fields change during the year," Schlotman said. "Hopefully later in the year the produce quality will improve."
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Regardless of whether food and beverage companies raise prices, though, it seems some consumers are already feeling the pinch of inflation. All the more reason for Nestle USA to avoid raising prices if possible, Grimwood said.
"The consumer is finding it pretty challenging at the present moment in time. We'd estimate, since the end of 2007, the consumers' disposable income has probably dropped by around 11 to 12 percent, you know, certainly by the end of this year," Grimwood noted.
-By CNBC's Drew Sandholm , with Reuters
